Let’s say you have $20,000 earmarked for trading. And let’s assume you buy a stock at $20 per share with a 20% stop loss. How many shares can you buy?

Well first, let’s figure out how much we’re willing to risk.

Let’s assume it’s 5%… 5% of $20,000 is $1,000. That means if you get stopped out of the idea, you can afford to lose no more than $1,000. And if you’re buying the investment at $20 with a 20% stop, that means your stop price is at $16.

So your stop-loss size is $4 (the difference between $16 and $20).

This means you can buy 250 shares ($1,000 divided by the stop loss of $4 = 250 shares).

Generally, William and Teeka have stop losses attached to their recommendations. But if they don’t have one, they simply position-size for a maximum loss of 2.5–5%.

Position-sizing is another way hedge funds and big Wall Street investors protect themselves from catastrophic losses.

And if you want a simple way to calculate your own position sizes, William and his team have put together a free position-sizing calculator for our readers.

Just click here (or the image below) and enter the ticker symbol of the stock you want to buy… your portfolio’s value… how much you’re willing to risk… and the type of stop you want to use.

The calculator does all the rest…

The example above shows the number of Apple shares an investor could buy with a hypothetical $100,000 portfolio, a position size of 2.5%, and trailing stop of 20%. (Please note: This example is not a trade recommendation.)

This is a must-have tool for every investor. I strongly recommend you bookmark it for your next trade.

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